On Thursday, the rupee continued to lose momentum against the US dollar in the interbank market, with the greenback reaching an all-time high of Rs206
According to the Pakistan Forex Association, the dollar broke through the 191-mark at the start of the day and climbed to Rs192.10 at 11:45 a.m., up Rs1.90 from the previous day’s closing of 190.20 — the currency’s previous high value before today’s session.
According to Asad Rizvi, the treasury head at Chase Manhattan Bank, the Pakistani rupee has devalued by about 9% versus the dollar since the Russian invasion of Ukraine, and has “reached all-time new lows,” according to Mettis Global, a web-based financial data and analytics platform.
He went on to say that the Russian offensive’s economic downturn and rising oil prices have harmed other currencies, notably the Indian rupee, and spurred inflation. And there was “no sign of relief in sight,” he added.
The rupee’s depreciation against the dollar has been ascribed to the country’s high import bill as well as the International Monetary Fund’s delay in releasing a $1 billion tranche.
According to a study published by Dawn on Wednesday, the economy has been shaken by the rising exchange rate.
The rupee had been losing value due to an out-of-control increase in imports and a slower rate of development in exports. The trade deficit, which reached $39 billion in July-April, mirrored this.
The main reason for the currency market’s optimistic trend, according to currency dealers, is increasing demand for the dollar. The incumbent government’s political stalling on the reversal of gasoline and energy subsidies, which is a need for the International Monetary Fund to resume its loan programme, has further damaged stakeholders’ trust.
The daily depreciation of the local currency could create a panic-like situation if investors are caught off guard. Consumer purchasing power is eroding due to rising inflation and depreciation of the local currency, as traders want bigger profits to protect their assets.
Unless and until inflows from anyplace show on the horizon, currency experts and dealers believe the rupee will continue to weaken in the coming days.
Currency dealer Zafar Paracha has described the situation as “hazardous,” predicting that the dollar’s value will soon exceed Rs200 due to increased demand.
Meanwhile, Malik Bostan, chairman of the Pakistan Forex Association, said the interbank market was “more unstable” than the open market, leading to a rise in dollar demand.
Furthermore, he stated that due to a shortage of the Saudi riyal, people planning to do Haj were buying dollars, which had led in a spike in the dollar’s value on the open market. However, he concluded that the boost in demand for the greenback was just temporary.
He was optimistic that the International Monetary Fund will agree to boost the amount of its $6 billion loan programme by $2 billion, a prospect that the international moneylender has made conditional on the total reversal of energy subsidies introduced by the former PTI administration.
The administration, on the other hand, has remained uncertain on whether or not to reverse these fiscally unsustainable handouts.
Abdullah Zaki, an importer and past president of the Karachi Chamber of Commerce and Industry, laments the mounting challenges caused by the dollar’s ascent.
He told Dawn.com that the cost of imported goods had risen, and that end consumers will eventually suffer the brunt of the increase.